BY virtue of the 18th Amendment introduced in April 2010, labour laws were omitted from the Concurrent Legislative List in the Constitution and devolved to the provinces. It was stated that the process of devolution of the subjects on the list to the provinces should be completed by June 30, 2011.

The Punjab government was most active in this regard and took the lead in devolving a number of labour laws before the stipulated date, followed by Khyber Pakhtunkhwa. The governments of Balochistan and Sindh remained dormant till they adopted the Industrial Relations Act in 2010 and 2013 respectively. In most cases, the legislatures only prefixed the names of their respective provinces before the title of the laws and substituted the word ‘federal’ with ‘provincial’ wherever it appeared in the text without making any other change.

The provincial governments are supposed to exercise their authority judiciously without causing any harm to the interests of the workers and their employers. Politicising a sensitive area like industrial relations may lead to labour unrest and agitation by labour leaders.

Politicising industrial relations may lead to labour unrest.

One example of this approach is the retracting of the law made by the Punjab government imposing limitations on the right to freedom of association. A restriction was imposed vide section 3(i) of the Punjab Industrial Relations Act, 2010, that workers of an establishment employing less than 50 workers could not form a union. This provision was in contravention of the Constitution and a convention of the ILO on the freedom of association. The government was forced to withdraw it after strong protests.

Similarly, the KP government attached stringent conditions to the employment of a contract worker appointed for a specified period as mentioned in the letter of contract. An amendment to the Khyber Pakhtunkhwa Industrial and Commercial Employment (Standing Orders) Act, 2012, provided that the employer should obtain a prior ‘no-objection certificate’ from the director, labour, valid only for six months, to contract out jobs that were of a peripheral nature and not related to the basic production/activities of the establishment. The recruitment of contract workers has therefore become difficult for employers in KP.

The management and administrative control of two of the legislations generating huge funds collected from the employers namely the Employees’ Old-Age Benefits Act, 1976 (EOBA) and the Workers’ Welfare Fund (WWF) Ordinance, 1971 has so far remained with the federal government. These two legislations are the focal points of complications for the federal government and employers on account of devolution. The complexities have further escalated due to the promulgation of the Sindh Employees’ Old-Age Benefits Act, 2014 and the Sindh Workers Welfare Fund Act 2014, to the exclusion of the other three provinces.

Through an amendment in 2005, the definition of wages under EOBA was changed to “wages means the rates of wages as declared under the Minimum Wages for Unskilled Workers Ordinance, 1969”. It implied that the monthly contributions would be paid to EOBI on the prescribed percentages of the applicable rate of minimum wages under this ordinance. This was Rs3,000 in 2005 and after gradual increments every year increased to Rs6,000 in 2008.

After the 18th Amendment, the minimum wages were increased to Rs7,000 per month in 2010 and to Rs8,000/ 9,000 in 2012 by the respective provinces under the Minimum Wages Ordinance, 1961 and not under the 1969 ordinance. However, the definition of wages under EOBA was not amended. Although the employers were not obliged to pay the contribution at the en­­hanced rate of wages, they complied with the directives issued to this effect by EOBI.

Thereafter, the minimum wages have been increased to Rs10,000 in 2013, Rs12,000 in 2014 and Rs13,000 in 2015 respectively, but still the majority of employers continue to pay the contribution on Rs8,000. Out of five large companies and two hospitals of repute surveyed, two companies and the hospitals are paying contributions on Rs8,000 and three companies at the applicable minimum wage rate, which is now Rs13,000 per month. EOBI is completely silent on the issue.

Moreover, companies making profits allocate 5pc of their annual profit before tax for distribution amongst eligible workers under the Companies Profits (Workers’ Participa­tion) Act, 1968.

In addition, they have to pay 2pc of profit before tax on total income, to the WWF. After distribution of a meagre amount to the workers, a huge amount of the companies’ profits also goes to the WWF. After devolution, companies are perplexed whether to pay their share of the WWF to the federal or to the provincial government. The Sindh government is now pressing the federal government to release its share of the funds under the two acts.

The writer is an industrial relations professional.

Published in Dawn, December 2nd, 2015